Wednesday, 21 November, 2018

BOJ leaves monetary policy unchanged

BOJ to maintain easing Asian stocks rise, Wall Street buoyed after measure passed to end US government shutdown
| 24 January, 2018, 08:47

The yen ticked up slightly on Tuesday after the Bank of Japan kept the monetary policy unchanged as expected but made tweaks to its views on inflation that some trader says pointed to a slightly less pessimistic central bank outlook on consumer prices.

On Tuesday, the BOJ said it would continue to purchase 10-year government bonds so that long-term interest rates would remain "at around zero percent".

The yen weakened to ¥111.15 against the dollar, down 0.2 percent from late U.S. levels, after BOJ Governor Haruhiko Kuroda reiterated his commitment to strong monetary easing, saying that there is still some distance to meeting its inflation target.

The Japan economy is forecast to continue its moderate expansion, the bank said.

"Inflation expectations have moved sideways recently", the BOJ said in the report, offering a more optimistic view than three months ago when it said they were on a weak note.

Bank of Japan Gov Haruhiko Kuroda gave few clues about any timeline for pulling back the bank's huge asset-buying program, shrugging off market expectations.

At 5 p.m., the dollar stood at ¥110.98-98, up from ¥110.78-79 at the same time Monday.

"These comments are likely to be perceived as Yen-negative (USD-JPY has rallied to above 111.10) but, as we discussed yesterday, we still think this would provide only a temporary relief to USD-JPY, given ongoing bearish dollar sentiment and still stretched yen shorts".

"With the economy ticking over fairly well but inflation still far from the 2-percent target, the last thing the central bank needs now is a damaging rise in the yen". Yuki Masujima, Bloomberg Economic. Almost half of those surveyed by Bloomberg said they expected the first move to come later this year.

Earlier in the day, the greenback dropped as low as near ¥110.50 after the BOJ announced its decision at the policy meeting to revise upward its inflation and economic growth forecast ranges for fiscal 2018 while keeping the current easing policy unchanged.

One reason often cited by traders for the dollar's climbdown is that its relative yield attraction is at risk as the world's major central banks are seen winding up their stimulus.

The BOJ is lagging behind its global peers in normalizing policy after years of unprecedented stimulus. Expectations that the European Central Bank may withdraw its stimulus gained momentum earlier this month after the accounts of its last policy meeting showed it could shift its policy communication early this year. The Bank of Canada raised its overnight rate target last week.


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